Unexpected States at Risk under TrumpCare’s Medicaid Cap

As they gear up to vote on the American Health Care Act (AHCA, also known as TrumpCare), Republican senators are increasingly focused on how the bill’s Medicaid “per-capita cap” would affect their states.1 If past is prologue, low-cost states would experience deeper cuts because such states have faster spending growth rates than other states and would quickly bump up against the cap’s fixed growth rate. This is a real concern. However, even states with relatively high costs could be at risk under this proposal.

The risk of a Medicaid per-capita cap in all states can be seen by examining the costs of people with extremely high health care costs. This map shows the top fifteen states ranked by the number of individuals with opioid addiction, premature babies, and organ transplants per capita. Some of these states would likely have relatively high Medicaid per-capita caps. However, if costs increase for addiction treatment, preterm births, and transplants, states would lose federal matching funds under TrumpCare and could be forced to reduce benefits or ration care.

Under a Medicaid per-capita cap, states with serious opioid epidemics could face a federal financing shortfall if their share of adult enrollees with addiction spikes

Overall, Medicaid pays for about one-fourth of all buprenorphine medication-assisted treatment for opioid use disorder, with eight states paying for over 40 percent of this treatment. The average cost to Medicaid for medication-assisted treatment is an estimated $5,500. The average cost of care for people with addiction is higher—often including mental health treatment, chronic illness care, emergency room services, and inpatient care. As such, the average cost of treating an enrollee with drug addiction exceeds the average cost of care for adults enrolled in Medicaid.

FIGURE 1

Under a Medicaid per-capita cap, states with serious opioid epidemics could face a federal financing shortfall if their share of adult enrollees with addiction spikes, driving up their average costs per enrollee. States that expand capacity such as opening an inpatient treatment facility to fill unmet demand would also increase average costs above the per-capita cap, resulting in federal funding shortfalls. This is to say nothing of the AHCA’s repeal of the Medicaid expansion, which has helped cover low-income childless adults with substance use and mental health disorders and who would otherwise have been uninsured. This could reduce coverage of people needing behavioral health care by an estimated 1.3 million and Medicaid funding for such services by $4.5 billion.

Premature Babies

In 2015, the number of premature or “preterm” births rose for the first time in eight years to nearly 383,000, affecting about one in ten infants. Louisiana and Mississippi ranked highest in preterm births per 10,000. (See Figure 2 below.) Babies born before thirty-seven weeks of pregnancy are at higher risk of disability such as cerebral palsy, blindness, and developmental delays. The risk of preterm births is greater for women who are African American, have high blood pressure, have diabetes, drink alcohol, or smoke. A recently rising reason for preterm births is mothers’ addiction to opioids.

The Institute of Medicine reported in 2006 that the societal costs of preterm births was $26.2 billion or $51,600 per infant—including medical care, special education, and lost household and labor productivity. In 2015, the average medical cost for a newborn suffering from opioid withdrawal (neonatal abstinence syndrome) was $150,000. Medicaid is a major payer for the costs of birth in the United States, with its coverage rates ranging from 27 percent in New Hampshire to 72 percent in New Mexico. It disproportionately covers preterm births, with 81 percent of hospital charges for neonatal abstinence syndrome attributed to Medicaid. The average cost of a preterm birth was $21,500 in 2011—almost nine times the estimated average Medicaid cost per child of $2,463 in the same year.

FIGURE 2

While states with a relatively high number of preterm births in the past would be motivated to reduce that number under a Medicaid per-capita cap, their ability to do so may be limited. Social determinants of health beyond the boundaries of the health system, for example, are challenging for state Medicaid agencies to address. Given the high cost of neonatal intensive care units, even small increases in premature babies would significantly raise the average state cost per child compared to the cap. This could put pressure on states to reduce other costs which is a particular challenge given Medicaid’s comprehensive benefit requirement for children.

Organ Transplants

In 2015, 33,610 people received organ transplants, with the highest number per 100,000 residents in the District of Columbia, Maryland, and Arizona. (See Figure 3 below.) The most common organ transplants are kidneys, livers, hearts, and lungs, respectively. The demand for organs exceeds the supply, and capacity to transplant organs is not uniformly distributed across the country. Organ transplantations are the most expensive procedures in the U.S. health care system.

The demand for organs exceeds the supply, and capacity to transplant organs is not uniformly distributed across the country.

In 2014, Medicare paid hospitals for transplantation: $97,000 for intestines, $29,000 for pancreases, and $127,000 for hearts—not counting post-hospital care and anti-rejection drugs. In 2016, Medicaid was the primary payer for one in ten of all organ transplants, and a higher percent of transplants of intestines (37 percent), pancreases (20 percent), hearts, and livers (17 percent each). The average cost of an organ transplant is many times higher than the estimated average cost of all health care for Medicaid adult enrollees ($6,075 in 2016 for adults not in covered by the Medicaid expansion).

Figure 3

The number of transplants hit record highs each year from 2013 to 2016, increasing cumulatively by 19.8 percent since 2012. A major contributor to increased donations was deaths from opioid overdoses, which accounted for 25 percent of donations in some parts of the country. Should this trend continue, states with high numbers of transplants will likely experience even more transplants since their local hospitals already conduct this complicated procedure. Additionally, clinical research investments could potentially increase the number of transplants by almost 2,000 per year, helping to meet the unfilled demand which far outstrips supply. States (e.g., Arizona and Oregon) have in the past attempted to limit Medicaid coverage of organ transplantation for budget reasons; under a federal Medicaid spending cap, they may be even more pressured to turn to this type of rationing.

These examples are just a few of many types of health costs that are difficult to predict and manage, and illustrate the challenges of fixed federal funding for health care programs like Medicaid.

Notes

Under the AHCA’s per-capita cap, the federal government’s Medicaid payments, which are currently at least 50 percent of total costs, would be capped based on a state’s 2016 spending per enrollee (broken out for different groups) adjusted annually for medical inflation.

Jeanne Lambrew, PhD, is a senior fellow at The Century Foundation and an adjunct professor at the NYU Wagner Graduate School of Public Service. Her writing, research, and teaching focus on policies to improve health care access, affordability, and quality.